Not our fault: Casteen blames feds for UVA's losses
Less than two months after unsuccessfully seeking a piece of the national stimulus package, University of Virginia president John Casteen announced Wednesday that the university endowment has lost $1.2 billion–- or 25 percent of its value–- and blamed the federal government for allegedly hiding an "undisclosed recession."
"We trusted the federal numbers," said Casteen in his annual State of the University address, "and believed during those four quarters of recession, that we were being told the truth. When it turned out that we were not, the basic assumptions of the model crashed."
In light of the economic downturn, Casteen announced in his afternoon remarks at Cabell Hall, UVA will be cutting $90 million from the current fiscal year's operating budget for an overall budget of $2.15 billion. Casteen credits UVA's in-house financial advisors as well as those at the embattled University of Virginia Investment Management Company (or UVIMCO), which is responsible for the endowment's investments, for keeping cuts to a minimum.
"We started trimming early," said Casteen. "We've done this before when we saw recessions coming. We did it simply because the economy didn't feel right during those four quarters when the government kept saying that we had no recession."
After the speech (which included an emotional remembrance of late admissions dean John A. "Jack" Blackburn, who died January 21), the Hook asked Casteen if he or anyone else at UVA could have done anything differently to lessen the endowment loss, Casteen replied, "There's really not much you can do if the information you have from the U.S. government is not accurate."
Casteen also announced a university-wide hiring freeze.
"We will not fill vacancies except in the most extreme situations," said Casteen. "Existing and future vacant positions will likely remain unfilled at least until we know the effects of the General Assembly budget and the federal stimulus package."
Despite this, Casteen emphasized that anyone who is presently working for the university has job security, and need not worry about recession-related unemployment.
"Laying off personnel in universities," Casteen said, "is a false economy. Places that have done it have inevitably hurt their programs. It's simply not a strategy that makes sense for a university that intends to be the very best of its kind."
In 2008, Casteen was the third-highest paid college president among public universities, with a compensation package of $797,048 according to the Chronicle of Higher Education. Asked if amid the nationwide belt-tightening he was willing to take a pay cut, Casteen said, "We'll have to see how this thing goes, but right now we're not asking anyone to take a pay cut."
One pay cut Casteen has already taken is that he lost the $220,000 he was adding annually for his side job, as a director of Wachovia Corporation, the banking company that dissolved, according to a Wachovia spokesperson, December 31 with its purchase by Wells Fargo.
Casteen emphasized his intent to continue donating portions of his salary back to the university. In 2008, Casteen made a $110,000 gift to the university capital campaign, roughly 13 percent of his university pay.
Despite the bad fiscal news, Casteen remained optimistic that UVA could continue to grow, mainly because UVA has yet to tap much of its potential market.
"Imagine what a sliver of the audience for executive education programs in Asia is worth," said Casteen. "Imagine what we can do in places where we have never been but where our name is known."
In Casteen's view, this sort of global-minded innovation will be what will ultimately see the university through the recession.
"We will meet these challenges, and we will succeed," said Casteen, "but we will be, once more, a new university when we're done."
–last updated 9:48am, February 4